Survey: US consumer spending veering south
Posted by Dennis Sellers 
Oct 7, 2008 at 6:36am
It’s not really a surprise but consumer spending has taken a turn for the worst, according to a new ChangeWave study. The research group says that the financial events of the past few weeks have led to a “reflexive recoiling” on the part of U.S. consumers.
The latest ChangeWave consumer survey—conducted in late September—shows another major leg downward for U.S. consumer spending. At the same time, confidence in the economy has dropped to exceptionally low levels.
Despite an already severe 15 month contraction, U.S. consumer spending is suddenly veering southwards—with more than half of our 4,067 survey respondents (52 percent) now saying they’ll spend less money over the next 90 days. That’s down eight points just since August. Only 18 percent say they’ll spend more—six points worse than in August.
Reasons for spending less
More respondents say they are spending less because they’re reducing debt (29 percent, up four points) or saving more money (26 percent, up five points), as anxiety about their financial well being is increasingly driving consumer behavior. Of course, general inflation and higher energy costs still rank as the top two reasons consumers are spending less, but in one of the survey’s few bright spots, their impact continues to slow for the second consecutive survey.
Impact of the U.S. credit crisis on consumers
The extraordinary events of the past few weeks have been well documented—including the Lehman Brothers bankruptcy, the U.S. government takeover of Fannie Mae and Freddie Mac, the $85 billion loan to AIG—and the government’s $700 billion bailout bill to help stem the credit crisis and calm the turmoil impacting financial institutions and the stock market.
The end result has been a huge loss in confidence in the U.S. stock market, according to ChangeWave. Two-thirds of respondents (69 percent) say they’re less confident in the U.S. stock market than they were 90 days ago. Only seven percent say they’re more confident.
The immediate repercussion of the crisis on investors is also clear. When we asked respondents where they would be investing more or less money, ChangeWave picked up a huge outflow from U.S. stocks (-20), mutual funds (-14), and non-U.S. stocks (-6), and a major inflow into cash (+24), gold (+22), income-dividend vehicles (+11), and other commodities (+8).
To compound matters, nearly two-thirds (66 percent) think the overall direction of the U.S. economy is going to worsen over the next 90 days—a huge 27-point jump since August and the worst reading of the past year.
Clearly, much of this sea change is related to the credit crisis and other recent events in the financial markets.
In the aftermath of the approval of the bailout bill, our current survey points to continued turbulence in the stock market. For as the survey shows, we’re in the midst of another major leg downward in the consumer-driven economy – with no signs of a turnaround in sight.
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Contributor
Dennis Sellers
Dennis has been a newspaper editor/reporter (seven years) and teacher (seven years). He has over 4,000 magazine, newspaper and online articles to his credit. He has also covered the Mac and tech industries for over a decade for such online publications as MacCentral, MacMinute and now MacsimumNews.
